Defendant Rejecting Pre-Institution Mediation Can't Challenge Suit For Non-Compliance: Delhi High Court

The Delhi High Court on 5 October held that a defendant who refuses to participate in pre-institution mediation under Section 12A of the Commercial Courts Act, 2015 cannot subsequently seek rejection of a commercial suit for failure to complete mediation, as the defendant cannot use its own refusal as a technical defence.

A Division Bench comprising Justices Vivek Chaudhary and Nisha Sahay Saxena dismissed an appeal by Netsys Network Pvt Ltd and its directors against a Single Judge's 10 August 2026 order rejecting their application to reject a commercial suit filed by Shawntel Consultancy Services. The judges observed:

“The object of Section 12A of the CC Act is to afford the parties to a commercial dispute a meaningful opportunity to resolve their dispute through mediation before the adjudicatory machinery of the Court is set in motion. The provision is intended to promote amicable resolution of commercial disputes and to reduce the burden on Courts; it is not intended to arm a defendant, who has himself spurned the opportunity of mediation, with a technical plea to non-suit the plaintiff.”

Shawntel supplied IT hardware and software to Netsys for projects involving DESIDOC, DHBVN and BHEL. It claimed that Rs. 1.79 crore remained outstanding after part payments totalling Rs. 2.10 crore and sought recovery of Rs. 2.29 crore, including contractual interest at 24% per annum.

On 27 April 2026, the Single Judge referred the parties to pre-litigation mediation. The defendants challenged the referral but withdrew their appeal on 27 July 2026, stating that they were unwilling to participate in mediation. A Non-Starter Report had been issued on 24 July 2026. The defendants also disputed the valuation of the suit, contending that only Rs. 1.21 crore was payable.

The Court held that the defendants could not seek rejection of the suit on the ground that mediation had not been completed after refusing to participate in the process. It also rejected their contention that the Non-Starter Report had been issued without their consent, observing that the report directly resulted from their refusal to participate. It stated:

“In this backdrop, the learned Single Judge has rightly held that the objection of the defendants had become academic. The very opportunity which Section 12A of the CC Act seeks to secure was afforded to the parties under the orders of the Court, and the same was declined by the defendants themselves. The contention that the Non-Starter Report was obtained without the consent of the defendants is wholly misconceived, since the non-starter outcome is the direct consequence of the defendants' own refusal to participate.”

On pecuniary jurisdiction, the Bench held that the Court must consider the plaintiff's pleaded claim, rather than the defendants' version of the amount payable, at the threshold stage. Shawntel's claim of Rs. 2,29,30,180, including interest, exceeded the applicable Rs. 2 crore threshold.

Accordingly, the High Court dismissed the appeal, finding no illegality, perversity or infirmity in the Single Judge's order, while clarifying that the suit must be decided on its merits and that its observations would not influence that determination.

For Appellants: Advocates S. P. Singh Rajput, Rajkumar Chauhan and Prerna Rajput